Sri Lanka enters deflation as administrative prices pull CCPI further down

In September, Sri Lanka experienced defl ation for the first time since 2015, with the general price level falling below that of a year ago. This decline was driven by administrative price adjustments that brought down key cost drivers, including food, fuel, and water tariffs.

Both food and non-food inflation turned negative, contributing to the overall deflationary trend. Despite this, annual average inflation remains positive, reflecting elevated price levels from earlier months. The continued drop in vegetable prices and the lingering effects of reduced fuel and water tariffs suggest that inflationary pressures have eased significantly in the short term. The Colombo Consumer Price Index (CCPI) has deflated on a Yearon- Year (YoY) basis recording -0.5% in September 2024 (vs 0.5% in August 2024). The YoY inflation of Food Group decreased to -0.3% in September 2024 (vs 0.8% in August 2024) and the YoY inflation of Non Food Group decreased to -0.5% in September 2024 (vs 0.4% in August 2024). The CCPI for all items for the month of September 2024 was 190.9 (vs 191.1 in August 2024) and it records a decrease of 0.2 index points (0.1%) compared to the previous month. This represents a decrease in expenditure value by Rs. 210.34 in the Market Basket In September, YoY food inflation decelerated by 0.11% whilst on a Month on Month (MoM) basis, this was the same decelerating by 0.17%. In terms of non-food inflation decelerated YoY by 0.37%, with a MoM deceleration of 0.06%.